Read more
Certain industries are rife with fraud and scams, and the financial services industry is one of them.
Picture: iStock
As 2025 sets in and South Africans find their feet after Januworry, financial scams remain a threat, with the 2024 Identity Fraud Report noting fraud rates in South Africa soared by more than 300% while nearly 5% of all attempted digital transactions were suspected to be fraudulent in the first half of the year.
A financial adviser can help protect you from these scams.
Certain industries are rife with fraud and scams, and the financial services industry is one of them. From simple scams offering easy credit at sky-high interest rates to property syndications gone wrong and even reputable companies finding their downfall due to dishonesty and greed, it is clear that all people are potential victims.
Sharon Hamman, senior legal adviser at Momentum, says South Africans have no choice but to be vigilant and make more informed decisions. “Scammers have a million tricks up their sleeves to take advantage of you in your unique situation. Whether you are well versed in financial matters or not, you need the right advice.”
She points out that people should watch out for red flags, such as easy access to loans, investments promising unusually high returns, pressure to act quickly, or dealing with ‘ghosts’ where credentials cannot be verified.
“If an offer seems too good to be true, it probably is,” Hamman warns.
ALSO READ: Banking scams are increasing – here’s how to protect yourself
Financial scams can look very legitimate
She explains scammers often present themselves as trustworthy, using charm and persuasion to convince you to make quick decisions. Some are very industrious, creating a false persona that seems credible and trustworthy.
“The tactics are no different from any other scammer. They can be convincing and con you out of your life savings in the matter of an hour. That is why it is crucial to take a step back and seek professional financial advice before deciding to act on any offers that are too good to be true.
“Do not trust anyone who boasts about a great opportunity as their tactic is to wow you with their greatness and promises and then put you under pressure to make a decision. There is no shortcut to wealth creation, especially in a cost-of-living crisis. Do not be swayed otherwise.”
She says sharing your personal details online can be as risky as confiding in a stranger. Hamman warns consumers to never disclose sensitive information unless they are certain they are dealing with a legitimate entity.
ALSO READ: How pyramid schemes scam you out of your money
If it looks like a financial scam, check it out first
If in doubt, her advice is to always verify requests by doing your own research, finding the person or business online and contacting the organisation directly, especially if it is your bank. “Your bank will never ask for your ATM PIN, credit card number, CVV, or passwords. If someone asks for these details, it is a red flag. Do not be fooled.”
That is why Hamman says engaging with a qualified, registered financial adviser is crucial for navigating today’s financial landscape.
“Professional advice not only guides clients toward sound financial decisions but also significantly reduces the likelihood of falling victim to financial scams. Advisers can help assess the legitimacy of investment opportunities or instructions from the bank and steer you away from potentially devastating pitfalls.”
Financial advisers are governed by the Financial Advisory and Intermediary Services Act (FAIS) and as a result they have to meet certain minimum requirements before being registered as a financial adviser.
ALSO READ: Five tips on how to spot a Crypto scam
The FAIS Act also imposes certain duties and responsibilities upon financial advisers to ensure that they provide sound and appropriate advice. One of the duties include to follow a due diligence process when considering a new investment or product, to confirm it is legitimate and to mitigate the risks for their clients.
Hamman says the first step to protect yourself is education, educating yourself to identify the red flags by learning from other people’s experiences, take the time to verify communications and see expert advice before making any financial commitments.
“Empowerment starts with education. The more you know the harder it is for scammers to take advantage of you.”
NOW READ: FSCA warns that scammers are impersonating financial services providers
Download our app
